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Why were the shares not eligible for corporate action benefits even though they were purchased before the ex-date?

Investors need to hold the shares in their demat accounts on or before the record date to be eligible for corporate action benefits. See What does record date and ex date mean?

Shares yet to be credited to the demat account as of the record date are not eligible for corporate action benefits.

Shares purchased two days before the record date or one day before the ex-date will always be credited to the demat account by the record date, except in the following scenarios:

  • Settlement holiday : If there’s a settlement holiday on or between the ex-date and the record date, the shares will be credited to the demat account on the next working settlement day. For example, If the shares are purchased on Monday, and Wednesday(record date) is a settlement holiday, shares will be delivered by Thursday (i.e. after the record date). Hence, these shares won’t be eligible for the corporate action benefits. Shares have to be purchased at least one trading day before Monday so that the shares are available in the demat account as on the record date.
  • Short delivery: If the seller fails to deliver the shares, it's considered as a short delivered. In such cases, the exchange conducts an auction and delivers the shares to the demat account by T+3 days, typically. So, if the shares are purchased on Monday, but due to short delivery, they are credited to the demat account on Thursday or later, the shares won’t be eligible for corporate action benefits since the shares weren’t in the demat account on the record date. See What is short delivery and what are its consequences?

Did you know? If shares are bought on ex-date, the stock price would have already dropped to factor in the corporate action. This would mean that there would in almost all cases no notional loss for missing out on corporate action.